New Agency - One Mission- To Protect Consumers

Critics Fight More Regulation

For those who don’t like more government regulation, this draft legislation is not going to sit well.   Unveiled by the Treasury Department Tuesday, the Obama administration is proposing an agency that would have one mission only – to protect consumers. 

The proposed Consumer Financial Protection Agency (CFPA) would write and oversee rules affecting the financial world, including credit cards and mortgages. Expect enforcement of new credit-card rules and more disclosure concerning mortgages, credit cards and financial products. And banks might be required to have permission from the customer before they are enrolled in costly overdraft plans. The CFPA would have the authority to ban or restrict forced arbitration clauses in financial products contracts. 

The Wall Street Journal printed a complete list of the draft legislation contained in 152-pages.

The financial-services industry would be subject to the subpoena power of the agency to investigate allegations of fraud and state attorneys general would be able to bring lawsuits for violations of the new rules. The financial-services industry would partially fund the agency.   

The White House will try to work with Congress to move the legislation.

Critics Include Banking, Chamber

Meanwhile, opposition is mounting from the business community which argues that a separate consumer regulator is not the answer. The American Bankers Association is asking all bankers throughout the country to contact their member of Congress in opposition.    

"Basically, the government is deciding what every bank in every circumstance should offer," said Ed Yingling, president and chief executive of the American Bankers Association to the WSJ.

The U.S. Chamber of Commerce is calling Mr. Obama’s plan “premature and overambitious”.    

Referring to an 88-page Treasury Department report issued two weeks ago in advance of announcing the reform, the Chamber quotes on its Web site an op-ed in the New York Times,

“Politicians are instinctively drawn to plans for government reorganization, because such plans are cheap and visible and dramatic. But planning is the easy part; execution is where the American government falls down. Adding bureaucratic layers will not cure the pathologies of regulation, which are rooted in our regulatory culture — the timidity of civil servants, the contamination of public administration by politics and interest groups, and the power of the “office consensus” to marginalize independent thinkers for not being team players….”

The Chamber warns the government should not stifle innovation and eliminate risk from the market. 

Most of the insurance industry and securities products would fall outside of the new agency’s regulation.  #